Page Nine

Friday, September 21, 2012

Phoenix, AZ-Eliminating Arizona's state income tax could put 20,000
people to work in the first year alone and business activity in the
state could rise by an additional $419 million each year, finds a new
Goldwater Institute policy report released Thursday. And Arizonans would have more money in their pockets to save, spend or invest.

In A New Tax Plan for a New Economy: How Eliminating the Income Tax Can
Create Jobs, Goldwater Institute Senior Economist Stephen Slivinski
argues that the income tax makes Arizona less attractive than our
neighbors when companies want to expand and create new jobs, it takes
hard-earned money out of worker's pockets, and creates instability in
state revenue levels. Slivinski recommends that lawmakers eliminate the
income tax outright and shift to a broad-based sales tax.

"We are falling behind neighboring states in economic recovery, and just
tweaking Arizona's tax code around the edges will not bring about the
long-term job growth that we need," said Slivinski.
"Eliminating the
income tax is the only proposal bold enough to dramatically boost new
economic growth and drive widespread job creation."
Slivinski argues that Arizona's tax structure is outdated, weighing the
state down and getting in the way of long-term economic and job growth.
Arizona lost nearly 300,000 jobs during the recession and has an
unemployment rate of 8.3 percent, among the highest in the nation.
According to Slivinski, eliminating the state income tax would make
Arizona more attractive to companies who want to expand. When
job-creators can keep more of their earnings to reinvest in their
businesses, they are more likely to expand and hire new workers. Under
this tax plan, Arizona workers will enjoy not only more opportunities to
find work, they will also keep more of the money they earn.

National economic data shows that states without an income tax see
substantially stronger economic growth than the national average and
states with income taxes. In Texas, for example, where there is no
income tax, the state gained over 400,000 new jobs between May of 2007
and May of 2012, and the state has regained all the jobs that it lost
during the recession.

Besides creating jobs and letting families keep more of their paychecks,
eliminating the income tax will also help stabilize the state budget.
Having a budget dependent on income taxes make state revenues more
vulnerable to economic ups and downs, according to Slivinski. Income
taxes make up nearly half of all state revenues and they are much more
volatile than sales taxes. During a boom period in the economy, as
incomes spike, so too does tax revenue, which allows for large increases
in government spending. But when a recession hits and incomes dive, so
too do tax collections and there is a big reduction in state revenues.
This was a major cause of the most recent budget deficits and sent
policymakers scrambling to cover the new spending they took on during
the boom period.

In his report, Slivinski shows how to eliminate the income tax, keep the
sales tax at the rate it is now, and still bring in the same amount of
government revenue we see today. The report also recommends reforms to
maximize this tax plan's effectiveness, including unifying the sales tax
base statewide and creating a constitutional amendment to stop state
and local governments from creating an income tax in the future.

"By taking steps to eliminate the income tax, Arizona will signal to
job-creators around the country that we are open for business and
committed to making our state competitive," said Slivinski. "The faster a
plan to eliminate the income tax is enacted, the stronger the economic
boost our state will receive."

The Goldwater Institute protects America's greatest inheritance-the
liberty and economic freedom of the individual-by holding government
accountable and standing up for regular taxpayers just like you. Lear
more about the Goldwater Institute at www.goldwaterinstitute.org<http://www.goldwaterinstitute.org/>.